Is it true that in the long run, a monopolistically competitive firm has market power but earns no profit? Explain
What will be an ideal response?
As strange as it sounds, yes. The firm earns zero profit because p = AC. The firm has market power because p > MC. One way to explain this is that the firm has market power to set price, but has no power to prevent entry.
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Which of the following would increase the unemployment rate?
A) an increase in unemployment insurance payments B) a law making it illegal to work more than 35 hours per week C) a cut in unemployment compensation D) a decrease in the minimum wage
Health care improvements often don't happen because:
A. they are too expensive to have any significant impact. B. national health insurance only exists in highly developed countries, like the U.S. C. doctors in government clinics have no incentive to practice good medicine. D. home remedies and traditional medicine are generally more expensive.
A luxury good has
A) a negative income elasticity. B) a cross elasticity of one. C) a very high income elasticity. D) a negative price elasticity.
Refer to the figure below. During low-peak times, what price-quantity combination should the firm charge to maximize profit? 
A. P1 and Q1 B. P3 and Q1 C. P2 and Q1 D. P1 and Q2